What If You're Not CEO Material?

David Cohen is the founder and CEO of TechStars. Previously, he founded several software and Web technology companies. David is an active start-up advocate, advisor, board member, and technology advisor who comments on these topics on his blog at DavidGCohen.com.

Deciding whether or not to bring in an outside CEO is one of the most gut-wrenching decisions that a founder will ever need to make. I’ve seen it many times before.

In 2009, Isaac Saldana and two cofounders started a company called SendGrid that helps companies reliably deliver transactional email—things like purchase receipts, confirmation messages, etc. They went through TechStars in 2009 with much success. Then I invested in the seed round along with Mark Solon of Highway 12 Ventures and we both joined the board of directors. Now Mark and I both have a bias toward founders holding the CEO title. Even so, early on we openly and directly discussed with Isaac the idea that it might make sense to bring in a more experienced CEO in the future. Isaac has amazing technical talent but not much executive-level operating experience.

Isaac was open to that possibility but wanted to stay CEO until it was clear that doing so would negatively impact the business. So we all agreed to monitor the situation. Eventually the time came: Isaac realized on his own that he was learning on the job and it was slowing the company down.

It’s not a moment that’s easy for any founder to confront. What if an outside CEO destroys all that you’ve built? On the other hand, what if you’re getting in the way of your own company?

If you’re thinking about this at your own start-up, here are a few tips to help you make the right decision:

Just because you make mistakes doesn’t mean you should step down. Recognize that there are times where you’re going to doubt your own abilities. You’re going to stumble—it’s part of the game. Because one of the main jobs of a CEO is to set the vision and strategy for the company, I’m a big believer in making one of the founders the default CEO. It’s difficult to find the same level of passion in an outsider. So take your time, and trust that you understand what is best for your business.

Talk to advisors you trust, then trust them. When Isaac realized his company needed a new CEO, he came to us and together we agreed to begin a CEO search. Shortly thereafter we found and hired Jim Franklin for the job, and ever since the business has taken off. Isaac has incredible technical skill and he’s a great product visionary. Bringing in an outside CEO has let him have a greater impact on the company because now he’s focusing on what he does best—the technology.

Surround yourself with experienced CEOs. Even if you’re not yet looking for one to replace you, spend time with seasoned CEOs. This will help you understand the kinds of skills and experiences that great CEOs bring to the table. The easiest way to do this is to spend real time with them working on specific projects. This approach worked well for SendGrid—after working with several experienced CEOs, Isaac and his team felt very comfortable with Jim’s skill set and management style well before he joined the company.

Visualize the future. It’s a great thought exercise to imagine your company when it’s 10 times bigger than it is today. After all, that’s where you’re heading, right? Thinking about what role you (and your cofounders) will play at that stage can help shape your thinking. Do you envision staying forever, or seeking new start-up challenges? Your role will change over time so consider where you can have the most impact.

Still not sure where you should be at your own company?

Isaac and Jim agree that the best role to which you can aspire is cofounder, not CEO. “Think of the founders as the designers of the business,” Jim says. “The CEO gets the

often unenviable job of execution. The CEO has a lonely job. Every other employee is a full member of a team—be it the management team, the founding team or a functional team. But the CEO has to maintain some distance from everyone else. In the military they say leaders should be friendly, but not familiar.”

If that doesn’t sound like your style, maybe it’s time to reevaluate your own strengths, weaknesses, and motivations. You’ll come to understand intuitively if and when the time is right to find a new CEO.